1. Field of the Invention
The present invention relates generally to a computer assisted marketplace, and more specifically to a system and method for automatically matching buyers and sellers in a computerized marketplace, and determining the transaction prices.
2. Description of the Prior Art
As computer networks have entered most parts of the business world, they are used to assists in business transactions previously performed entirely manually, or with minimal automatic assistance. One area in which interconnected systems are becoming commonly used is in the automated purchasing of products, both by business at the wholesale level, and individual purchasers at the retail level. Various types of online marketplaces are growing to enable online purchases.
At present, most online marketplaces use some form of auction to set prices and determine a match. There are many forms of auctions, which are reviewed in P. Klemperer, “Auction Theory: A Guide to the Literature,” Journal of Economic Surveys, 13 (3), 1999, 227-286. The form that will be most useful for the present purposes is a sealed bid auction. In this auction, there is one item for sale. Several buyers give sealed bids 20 to the auctioneer. As illustrated in FIG. 1, the seller also gives the auctioneer a reserve price 22, which is the worst price (or lowest price in this case) that he or she will accept for the item.
If any of the buyers' bids are higher than the reserve price 22, then the seller is matched with the highest bidding buyer. (Otherwise, no sale occurs.) In a first price auction, the buyer pays the price of their bid, and in a second price or Vickery auction the highest bidder pays the second highest price. As described in Klemperer, the expected revenue from first and second price auctions are the same, since rational buyers will adjust their bids accordingly to account for the “winner's curse.”
There is also a sealed bid reverse auction, where a buyer accepts bids to buy something at the lowest price. This is often used in procurement. As illustrated in FIG. 2, sellers give bids 24 specifying their lowest price, and the buyer's reserve price 26 is the worst high price that he or she will accept.
A matching market can be viewed as a combination of several forward and reverse auctions happening simultaneously. The marketplace sorts out which matches actually occur, so that each item is only bought or sold one time, and sets the price for the transaction. A matching is a pairing of buyers with sellers so that each participant has at most one partner. Some participants may be left unmatched, which is inevitable if the number of buyers and sellers is unequal.
Automated marketplaces presently available do not adequately provide the best value for all participants. Also, they may not be stable, in the sense that a solution that is achieved is better for all participants than those participants could achieve on their own. These limitations have prevented matching marketplaces from becoming accepted as a mechanism to match buyers and sellers of products automatically.
It would be desirable to provide a system and method that could automatically match buyers and sellers in a marketplace. It would be further desirable for such a system and method to provide optimum results and ensure a stable result.